Category Archives: Uncategorized

Start the week right with this exposé on anonymous corporations

Ken Silverstein, one of the great long-standing US investigative reporters, has aimed his razor skills and obsessive memory upon the offshore anonymous corporation game, and especially the law firm Mossack Fonseca & Co., of Panama. A tour de force of reporting, fully worth reading, at this link.

who makes these fictitious entities possible? To conduct business, shell companies like Drex need a registered agent, sometimes an attorney, who files the required incorporation papers and whose office usually serves as the shell’s address. This process creates a layer between the shell and its owner, especially if the dummy company is filed in a secrecy haven where ownership information is guarded behind an impenetrable wall of laws and regulations. In Makhlouf’s case—and, I discovered, in the case of various other crooked businessmen and international gangsters—the organization that helped incorporate his shell company and shield it from international scrutiny was a law firm called Mossack Fonseca…

Since the 70s the law firm has expanded operations and now works with affiliated offices in 44 countries, including the Bahamas, Cyprus, Hong Kong, Switzerland, Brazil, Jersey, Luxembourg, the British Virgin Islands, and—perhaps most troubling—the US, specifically the states of Wyoming, Florida, and Nevada.

Mossack Fonseca, of course, is not alone in setting up shell companies used by the world’s crooks and tax evaders. Across the globe, there are vast numbers of competing firms, and many of them register shells that are every bit as shady as Drex. Proof of this includes the case of Viktor Bout, who, in the 1990s, peddled arms to the Taliban through a Delaware-registered shell. More recently, in 2010, a man named Khalid Ouazzani pleaded guilty to using a Kansas City, Missouri, firm called Truman Used Auto Parts to move money for Al Qaeda.

Scattered news accounts and international investigations have pointed to Mossack Fonseca as one of the widest-reaching creators of shell companies in the world, but it has, until now, used an array of legal and accounting tricks that have allowed it and its clients to mostly fly under the radar.

(The company disputes this claim and asserted in an email that “there is no court or government record that has ever identified Mossack Fonseca as the creator of ‘shell’ companies. Anything tying our group to ‘criminal activity’ is unfounded, inasmuch as we have not actually been notified of the existence of any legal proceeding… thus far.”)

That just gives a hint, please go read it, it’s the sort of education that you need if you want to know how power and money really work in this world.

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Malaysia eliminates fuel subsidies

Here’s an oil-exporting country that is taking advantage of the low price of oil to eliminate subsidies. That may be a tough policy to maintain when prices rise again, but at least they are trying.

You can see they did a reasonably good job of this transition by the fact that it hasn’t been in the news. No riots, no panic. Here’s a study of how the state sought public support for the change, then started it in 2013.

Interesting.

Why it’s so easy to find corruption stories

Page 24 of OECD foreign bribery report

Page 24 of OECD foreign bribery report

The OECD has a new report about corruption. It gives people like me a good guide to where to look for scandal stories.

The OECD says state-owned enterprises are responsible for a huge part of the problem. Eighty percent of discovered cases of foreign bribery involved state companies. The natural resource industry is most vulnerable. Three quarters of cases involve intermediaries, many of them in offshore tax havens.

State companies, natural resources, and intermediaries in offshore tax havens. Where could we find such things? Sounds like there will continue to be work for those of us interested in energy corruption stories in Latin America.

Hat-tip to Global Witness for pointing out the new report. They want to help reduce corruption by pushing for an end to anonymous corporate registration. I think that will take some very concerted international cooperation. There is always some poor country that will want to whore itself out to corporations, whether as a tax haven, internet domain registry, or anonymous corporate registration hideout. Panama gets more transparent, along come Nevis and Mauritius.

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Sometimes a cigar is just a cigar ($PRE.to, Derwick Associates)

This week I noticed this curious securities filing from US Oil Sands Inc from 2012. It includes the following tidbit:

Screen Shot 2014-11-25 at 4.08.17 PM


There’s nothing unusual about these two investment companies buying shares of an oil company. Ice Rose Holdings is controlled by Serafino Iacono, co-chairman of Pacific Rubiales Energy Corp., ID Introduction Ltd. is controlled by Jose Francisco Arata, as shown here. Arata is president of Pacific Rubiales. Oil guys, buying shares in an oil company.

What caught my eye was the address of Arata’s company. Torre Kyra PH-1, where have I heard that address before? That’s right: Derwick Associates. Having spent too many hours studying both Pacific Rubiales and Derwick Associates, without the vaguest sense that they overlapped*, I had to wipe up the shrapnel from my exploding head.

A Pacific Rubiales executive using Derwick’s address in 2012. That would have been pretty interesting.

But as I always like to do, I gave Pacific Rubiales a chance to comment. And in a rare departure, the company responded. A gracious note, too (even though they apparently have me confused with another blogger). Here’s what they say:

As to Derwick Associates, Mr. Arata does not know the company or the people running it and has no relationship with that company.  The address in question was the address in Caracas for companies that Mr. Arata worked for, but the office was sold back in 2009 and has not been used by Mr. Arata since. The filing from 2012 is simply an error, resulting from a failure on our part to update ID Introduction’s corporate address when helping Mr. Arata file the notice of private placement you read.  The proper corporate address is actually in Panama.

Thanks for the heads’ up on this, as we are now checking all our filings to make sure that ID Introduction’s proper address is reflected in all current filings.

So now on to another person using the address of Torre Kyra, PH-1. Mr. Alvarado, I’d love to give you a chance to comment, too, but I can’t find any contact info. Be in touch, let me know how to reach you.

* Unless you count that they both have dealings with David Osio’s financial institutions. But who doesn’t, right?

ConocoPhillips investigating possible Citgo sale

Reuters had the scoop yesterday:

Venezuela’s state-run oil company PDVSA is using the sale of its Citgo Petroleum Corp refining assets to hinder the ability of ConocoPhillips to collect an expected arbitration award, the U.S. oil company said in a Texas court filing.

Evidence indicates PDVSA is liquidating its Citgo interests “to remove the proceeds from the United States to Venezuela or elsewhere with the specific intent to hinder, delay or defraud its creditors,” Conoco said on Monday in a petition for court approval to investigate that claim.

But as is typical, the big wire service couldn’t be dicked to post the filing. So here you go, yours at no extra fee. The “donate” button is over there on the right if you want to support independent journalism that actually gives you original documents, rather than making you scrounge around for them.

Leak of Venezuela contractor documents raises questions (Updated)

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Tomás Lander

What appears to be a leak of internal documents from Missouri electricity industry contractor ProEnergy Services and Venezuelan contractor Derwick Associates adds to questions about how ProEnergy got deals to sell products made by General Electric, Pratt & Whitney and Rolls Royce to Venezuelan state industries starting in late 2009.

The documents, posted to the website Scribd Nov. 17 by a person using the name “Tomás Lander,” include a proposal dated June 2009 from ProEnergy to Venezuela offering power plants. At the time, Venezuela was suffering periodic blackouts because demand for electricity was growing, a drought was draining hydroelectric reservoirs and the 2008 commodities bust had left the country with limited cash to deal with the crisis.

I haven’t been able to confirm that the documents are genuine. I sent e-mails to Derwick Associates’ press line, ProEnergy CEO Jeff Cannon and ProEnergy chief counsel Scott Dieball, asking them to validate or refute the authenticity of the documents and requesting comment. I haven’t received any response. At a glance, nothing about the documents indicates that they are forgeries. As such, for the rest of this article I will treat them as genuine documents. If ProEnergy, Derwick or anyone else offers any commentary on the documents, I will update this post to reflect their response.

The documents don’t show what happened to that ProEnergy proposal. However, another document shows that two months later, ProEnergy and Derwick agreed to cooperate in seeking work in Venezuela. Their agreement forbids either company from revealing “any and all details regarding transactions between Derwick and ProEnergy, details regarding transactions between a party and third parties, and the payment of fees and commissions.”*

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